Is a 72-month car loan a bad idea?
Have a guess first. It sticks better.
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The longer loan is sold on the payment, and the payment really is smaller. What it buys you is more months during which you owe more than the car is worth.
Two things are moving at once and they move at different speeds. The car loses roughly 20% in the first year. The loan barely moves, because early payments are mostly interest.
That gap has a practical cost. If the car is written off or you need to sell, insurance pays what it is worth, not what you owe, and the difference is yours. Being underwater for 32 months means 32 months where an ordinary accident turns into a bill.
Run it with your own numbers →
Free, no account. Change anything and watch the total move.
Session 6: The thing that loses value while you pay for it →
Depreciation against amortization, how people end up underwater, and what the dealer is actually selling you.
- What does it really cost?
- Who gets paid if I say yes?
- What would this money do somewhere else?
Other straight answers